Many high schools and colleges do not teach basic personal finance, leaving young adults to fend for themselves when they enter the workforce. More often than not, young adults have no idea how to balance their checkbook, apply for credit, budget their money, and how to minimize debt.
While hiring a Utah financial-planning service can go a long way in keeping your finances in check, there are a few basic things you should do yourself. Here’s how you can manage your finances and be smart about your money:
1. Delay big-ticket purchases
Avoid buying things right away. Give yourself a day or two to think whether or not the purchase is necessary. Even if the item is discounted, you should stop and consider whether you need the item or not.
The delay will teach you to be smart about buying. If, for some reason, you lose your source of income, would you rather have the item you just purchased or its equivalent in cash and investments?
2. A budget is your friend
Most people see budgets as an annoyance. A better way to look at a budget is it allows you to get what you want in a financially sustainable way. Without a budget, you would not know where your money goes, and you would not be able to save for that new gadget or vacation.
Think of your budget as a plan that helps you achieve your goals. If you have a positive attitude towards your budget, you are more likely to stick to it.
3. Choose a budget plan
And stick to it. There are many budget plans out there with different styles and rules. It does not matter which one you choose as long as it is realistic, manageable, and allows you to manage your money sustainably. Stay away from plans that promise a lot in such a short time. These types of plans often force you to sacrifice a lot, and you are less likely to follow it after some time.
One simple budgeting plan is the 50/20/30 method. Under this plan, you use half of your income for necessities such as bills, food, rent, and transportation. Twenty percent goes to savings, retirement, debt financing, and a fund you can use for emergencies. The final thirty percent go to fun or nonessential spending such as vacations, shopping, and alcohol.
4. Saving a lot is not the most sensible decision
While you need to have a rainy day fund tucked away, keeping all of your extra money in a savings account is not a sensible financial decision. While it is essential to stay liquid, you also need to invest a portion of your money in financial instruments.
Money stuck in a savings account loses its value due to inflation. By putting your money in stocks and funds, you are investing in your future.
You don’t need a degree in finance or business administration to learn how to manage your finances. These financial pointers will help you balance your books better and sustainably manage your money. Just be smart and sensible, and avoid making rash decisions.